This study aimed at finding out the role of practices and challenges of good governance in enhancing good governance practices in Addis Ababa University using the main campus of the university. The main objective of this study was to assess the practices and challenges of good governance at Addis Ababa University. The methodology used to conduct this study was qualitative and quantitative research design where random sampling method was employed to select respondents. Questionnaires were made use of to gather raw data from the respondents. Secondary data was also used. The data was analyzed by using, data analysis software SPSS version 20 and presented using tables. The study found that good governance practices are not adhered to at university. It was also revealed that good governance contribute to quality of education and employee satisfaction at Addis Ababa University. The study further found that good governance practices at Addis Ababa University are hindered by various factors such as bureaucracy, reluctance and inefficient. The study lastly concluded the existence of a relationship between good governance with quality of education and employee satisfaction. The study recommended that, to improve quality of education and employee satisfaction at, Addis Ababa University. The management of Addis Ababa University should ensure that all Addis Ababa University staff are aware of the principles of good governance and adhere to them in their day to day activities. It was suggested, Addis Ababa University , to pay attention to employee satisfaction and human resources development strategies with appropriate training packages to enhance knowledge of good governance.